2026: VAT adjustment on services relating to immovable property

The Ministry of Finance proposes an adjustment scheme for services relating to immovable property from € 30,000. We understand the aim, but have reservations about the threshold and the scope.

The Dutch Ministry of Finance has put a draft bill out for public consultation containing a VAT adjustment scheme for services relating to immovable property, such as renovation, repair and maintenance, where the consideration is € 30,000 or more. The scheme takes effect on 1 January 2026 and applies only to services first used on or after that date.

What the proposal means

For services relating to immovable property, the VAT deduction is currently final after the financial year of first use. The proposal is to track that deduction for four further financial years, each year for one fifth of the VAT on the investment service.

For each service above the threshold, a separate period of, in short, five years therefore begins to run. Where the use giving a right to deduct increases or decreases during that period, the deduction must be adjusted. Where a property is renovated and used entirely for taxed purposes in 2026 but 70% in 2027, 30% of one fifth of the VAT on the renovation must be repaid in the final return for 2027.

That period is separate from the adjustment period for the acquisition of the property itself. The proposal therefore increases the burden on businesses: for each property both a period for the property itself and periods for services relating to it, such as maintenance and improvement, may be running.

Short-stay arrangements

With this proposal the ministry wants to put a stop to short-stay arrangements. In short, these involve creating living accommodation in an existing building without a new building arising for VAT purposes. The renovated building is first used for short-stay letting taxed at 9%, for instance to expatriates or international students, allowing the landlord to deduct the VAT on the renovation costs in full. After the end of that financial year the accommodation is used for long-term, exempt letting.

Because under current law the deduction is already final after that year, the later use triggers no adjustment. The proposal changes that: the deduction must be tracked for the following four years and adjusted where the use giving a right to deduct is higher or lower.

Our comments

We understand why the ministry finds the outcome of short-stay arrangements undesirable. These are services used over a long period, so it makes little sense to treat them as fully consumed in the year of first use. From the perspective of fiscal neutrality we consider it logical and desirable to track the deduction on lasting services whose costs are normally depreciated over several years beyond that year as well. There is no justification for treating investment services differently from capital goods, and a five-year period reflects actual use better.

Workability should not be lost sight of, however. The threshold of € 30,000 excluding VAT per service is in our view on the low side. With large or maintenance-intensive buildings, such as listed properties, numerous periods will start running that the occupier or operator must track. That is a considerable additional burden.

The ministry gives no reasoning for that figure. In practice, short-stay arrangements involve renovation work costing considerably more, so a € 30,000 threshold does not appear necessary to counter them. It would be desirable for the ministry to explain what the threshold is based on, so that it can be responded to.

The scheme also covers services of € 30,000 on which depreciation is not normally taken over several years, such as repainting a listed building or other maintenance and repair costs. In our view that is not permitted under article 190 of the VAT Directive, because that provision only provides for multi-year adjustment on investment services, meaning services distinguished by their lasting nature and value whose costs are not normally booked as running costs but depreciated over several years. On that point we consider the proposal contrary to EU law.